Para 3.5.12 — MSO (Audit)
Original Rule Text
3.5.12 It frequently happens, however, that the power of sanctioning grants is delegated to subordinate authorities subject to the prior fulfilment of certain conditions by the grantees. Thus, grants may be made to educational institutions which attain specified standards in respect of number of scholars, methods of instruction, etc. In such cases, if the order sanctioning the grant quotes the relevant rules, Audit should ordinarily accept the expressed or implied certificate of the sanctioning authority that the prescribed conditions have been fulfilled, but it should utilize any opportunity available to scrutinize the methods by which the authority satisfied itself of such fulfilment. In addition, a test audit should be applied, where possible, to verify the fulfilment of the conditions in individual cases.
# Notes:
(i) The test audit suggested in this rule can most conveniently be done in the office of the sanctioning authority where all the necessary records will be available. The precise method by which the check will be exercised for different categories of grants-in-aid may be settled by the Accountant General in consultation with the Comptroller and Auditor General and detailed in the relevant Office Manual.
(ii) On the question of regulation of the quantum of the grants-in-aid to State Governments for developmental schemes after taking into account the miscellaneous receipts accruing from such schemes, the Central Government have decided as follows:
(a) Where recurring grants-in-aid are given, the quantum of such grants should be based on the net expenditure arrived at by deducting the estimated receipts from the gross expenditure.
(b) In respect of grants-in-aid of a capital nature (e.g. non-recurring grant for the construction of a building or acquisition of a machinery), not only the elements of possible receipts that would accrue to the State Government should be taken into account in determining the quantum of the grants, but any receipts from the disposal of property constructed or acquired by utilizing
the grant relating to schemes which were closed or abandoned should also be reckoned proportionately.
While conducting the test audit in the office of the sanctioning authority, it should be examined whether these instructions and similar instructions, if any, issued by the State Government have been complied with.
(iii) Governments often stipulate that, before a grant is paid, the sanctioning authorities under its control should, as far as possible, obtain audited statements of the accounts of the grantee institutions in order to establish that the grant is justified by their financial position and also to ensure that any previous grant was spent for the purpose for which it was intended. Audit should verify that the sanctioning authorities duly adhere to the stipulation.
What This Means
When grant-in-aid sanctioning power is delegated to subordinate officers with conditions the grantees must fulfill (like educational standards), audit generally accepts the sanctioning authority's certification that conditions were met. However, auditors should look for opportunities to examine how that certification was arrived at and should apply test audits to verify condition fulfillment in individual cases. For state government grants, the quantum should account for receipts from the scheme, and for capital grants, disposal proceeds from abandoned projects must be proportionately recovered.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Delegated sanctioning authority's certificate of condition fulfillment is generally accepted
- 2Audit should scrutinize the methods used to verify condition fulfillment
- 3Test audit should be applied to individual cases where possible
- 4Test audit is best done at the sanctioning authority's office where records are available
- 5Recurring grants should be based on net expenditure (gross minus estimated receipts)
- 6Capital grant disposal proceeds from closed schemes must be recovered proportionately
- 7Technical statements from responsible technical officers are accepted on face value
Practical Example
A District Education Officer sanctions grants to 50 schools that meet prescribed student-teacher ratio standards. The auditor visits the DEO's office and examines the inspection reports used to certify that five randomly selected schools actually met the standards. In two cases, the inspection reports are missing, which is flagged as an audit observation about inadequate verification procedures.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why does audit accept the sanctioning authority's certificate instead of independently verifying?▼
What does 'test audit' mean in this context?▼
Why should receipts from developmental schemes be deducted from grant amounts?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.